Price war fears wipe £1.3bn off supermarkets

Wm Morrison wiped more than £1.3bn off the value of London’s listed supermarkets after the grocer kick-off a price war with its rivals.

Shares in Morrisons slumped 8pc after the troubled company disclosed it would slash prices, in the wake of a £176m pre-tax loss for the year to February 2.

Having fallen behind its rivals, the company said it would invest £1bn on price cutting and product improvement over the next three years, an announcement that knocked shares in its listed competitors: J Sainsbury tumbled 6.6pc, and Tesco slid 3.1pc.

The three supermarkets were the heaviest fallers in the FTSE 100, and the declines knocked some £1.3bn off their combined market values.

Darren Shirley, analyst at broker Shore Capital, said other supermarket companies were unlikely to be complacent and that there was likely to be pricing “contagion”.

“Price investment with a refocused promotional programme can only be considered a worry for the industry and investors therein,” the analyst said.

“Other supermarkets cannot stand idly by and let a competitor steal a march and so for Asda and Tesco in particular there may be concern as to what Morrison's is doing.

“The scope for ‘contagion’ on the pricing front is high and, therefore, gross margin pressure can be expected to build.”

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